Taking responsibility for your personal finance has never been more important than it is now. The largest and supposedly strongest markets in the world are fighting to keep their heads above water, so it's important for you to know and understand your exact financial status to weather the storm.
When it comes to personal finance, Don Taylor from Bankrate recommends that the first thing you need to do is identify your life goals and map out a financial plan that will help you to achieve them. This plan should be revisited on a semi-regular basis and adjusted as goals change. After which you need to determine where all of your money goes. This means you need to get to grips with your credit card spending, your casual spend, your accounts and any investments or annuities that you already own. Then draw up what Taylor calls a spending plan. He refers to a spending plan rather than a budget because "spending plan" sounds more positive and less like a monthly chore than budget.
Once your spending plan has been completed, you need to determine how much you can afford to spend on securing your future, ie investments, pension plans and retirement annuities. If you already have some money invested you should relook at them and possibly try to increase your monthly payments. But before you do anything on your own you need to consult a financial advisor; someone who will help you with your financial planning.
According to Taylor, financial plan needs to be comprehensive. It's not a short term thing and needs to consider the bigger picture. It includes all of your insurance, employee benefits, taxes and investments and retirement and estate planning. At this stage you should also assess your risk tolerance. High-risk investments tend to have a high-yield, but, obviously the risk that you could lose almost everything is great. Low-risk investments, on the other hand, are reliably stable and safe, but they will not net as much money. If you decide to go the safer route, Taylor recommends that you try to invest as much money as you can afford every month, so that your investment base is as high as possible.
And then, of course, you have to know your portfolio. Understand what it is that you have bought, know the risks, know the fees and most importantly, understand the implications of financing or surrendering your investment. Annuities can be particularly tricky cancel with an assortment of associated fees and penalties.
With annuities, Walter Updegrave recommends that you choose well known and reputable insurers who are more likely to withstand a financial crisis. Spreading your investment among a couple of strong insurers is also likely to lower your financial risk.
References:
http://www.cnbc.com/id/28752293
http://money.cnn.com/2009/01/22/pf/expert/annuity_safety.moneymag/index.htm?postversion=2009012606